Author Question: Which of the following statements is (are) true regarding taxation of life insurance? I. Life ... (Read 111 times)

Capo · **on:** Jul 11, 2018

Which of the following statements is (are) true regarding taxation of life insurance?

I. Life insurance proceeds paid in a lump-sum to a designated beneficiary are received free of federal income taxes.
II. The policyowner must pay taxes annually on the amount by which the cash value of his or her life insurance policy has increased.
A) I only
B) II only
C) both I and II
D) neither I nor II

Question 2

Mary is interested in comparing life insurance policies. Rather than looking at the cost per thousand, she would like to compare the rate of return earned on the savings portion of the policy. Which of the following would be of the most interest to Mary?

A) the policy's Linton Yield
B) the policy's surrender cost
C) the policy's traditional net cost
D) the policy's net payment cost